Financing Real Estate: 4 Ways to Help You Score the Property You Want
Each year hundreds of thousands of new homes are sold within the United States. Whether a Real Estate investor is interested in purchasing a home in need of renovation or chooses to buy a vacant lot, he or she will have to decide how they are going to finance their investment. Fortunately there are a number of ways to successfully finance Real Estate investment.
4 Ways To Obtain Real Estate Financing
Choosing the right Real Estate financing solution will depend on your personal financial needs, as well as your chosen investment.
#1. Conventional Loan — A conventional or traditional loan is typically issued from mortgage lending institutions, such as banks. While these loans are typically reliable, they can be slow to fulfill and usually span a long period of time.
#2. Secured Loan — A secured loan is also known as a collateral loan. This type of loan will require you to leverage personal property, such as a car or existing property, in order to obtain the loan. The largest disadvantage of a secured loan is that if you default, then whatever personal property you used as collateral will be transferred to the lender. Generally speaking, if you used a highly valued piece of personal property as collateral, then you will typically receive a better interest rate. However, it is important to note that the length of the loan as well as your credit history will affect the secured loan.
#3. Hard Money Loan — A hard money loan is one that is typically obtained from a private business or individual lender for the sole purpose of investing in residential or commercial Real Estate. Typically hard money lending options will have a few defining characteristics, including: shorter term lengths and varying interest rates. In many instances a lender won’t require income verification, credit references, or a personal credit report when they issue a hard money loan. Additionally, one of the top benefits of a hard money loan is that the lender can typically provide the funds needed to complete a Real Estate transaction within a short period of time.
#4. Private Money Loan — As the name suggests, a private money loan is similar to a hard money loan, however, it is typically given by someone who personally knows the buyer. In these instances the lender is not typically a professional lender, but rather a person that the Real Estate investor knows. Whether the private lender is a family member or a friend, it is important that the conditions of the loan are clearly defined within a legal contract.
The Bottom Line: Work With A Financial Provider You Trust
No matter what type of real estate financing you choose to obtain, it is important that you work with a team of financial providers that you trust. It is a major advantage if you partner with a hard money lender who has extensive experience working with developers, builders, and real estate investors, alike.
